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NEC to axe 20,000

The meltdown is turning Japanese

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NEC joined the parade of tech firms announcing sinking profits, downsized forecasts, and shrinking workforces when the company today released financial results for its most recent quarter.

Today's financial results detailed the nine-month period of April through December 2008. Compared with the same period in 2007, revenue fell 3.7 per cent, from ¥3.19 trillion ($35.8bn, £25.1bn) to ¥3.08 trillion ($34.7bn, £24.3bn) in 2008.

While that drop may not look too worrisome, income figures tell a more troubling story. Operating income dropped from ¥43.4bn ($485m, £341m) in the black in 2007 to ¥11.4bn ($127m, £85m) in the red in 2008.

Sales for the particularly melty last three months of 2008 suffered more than during the rest of the nine-month period, with a decline of 9.9 per cent from ¥1.05 trillion ($11.8bn, £8.3bn) in the same period in 2007 to ¥948.3bn ($10.6bn, £7.4bn) in 2008.

The company also revised its October 2008 sales forecast for their full fiscal year ending in March 2009, down from ¥4.6 trillion ($51.4bn, £36.1bn) to ¥4.2 trillion ($46.9bn, £33bn), which will be a 9 per cent drop from their previous fiscal year, during which NEC brought in ¥4.617 trillion ($51.6bn, £36.2bn).

Operating losses are now projected to be ¥30bn ($335m, £235m) for the full fiscal year, and not the positive income of ¥156.8bn ($1.8bn, £1.23bn) anticipated by the October forecast.

The new projection shows income losses across the board - a 31.2 per cent slide in mobile and personal products, a 49.6 per cent drop in IT and networking, and a hefty 84.4 per cent nosedive in "electron devices," aka chips.

With these numbers staring them in the face, NEC has chosen to shrink its workforce, as well - by a lot.

NEC president Kaoru Yano, NEC's president, said today about the job cuts that "We are aiming for 20,000 or more," and that about half of that number would be full-timers.

Cutting that many people from your payroll is a time-consuming process, especially in a country like Japan, which has traditionally protected its workforce with strict job-security laws.

That said, those laws have been relaxed in the last decade, so much so that Yano estimates that he can send the full 20,000 packing by March 2010 - which, not coincidentally, will mark the end of the company's next fiscal year.

And it can't have made NEC workers who fear they may be among the unlucky 20,000 feel all warm and cuddly to have heard Yano's description of them.